For resin manufacturers, 2011 was full of challenges, as volatility in the cost and supply of key raw materials, combined with weakened demand, made for a difficult year. However, resin industry executives say that sales of resins have been on the upswing in 2012, and are optimistic about the market.

“Resins used in packaging inks and overprint varnishes were steady in 2011, although there was noticeable softening toward the end of last year as consumer confidence waned and everyone in the value chain managed their inventories very tightly,” said Rick Krause, business director, BASF Corporation – Resins and Performance Additives.

Mr. Krause noted that 2012 has started steadily with growing optimism of a return to some economic growth, but even packaging has not yet fully returned to its typical GDP growth rates.

“There continues to be pressure on industry profitability as the entire value chain struggles to recover raw material cost increases that continue to occur since early 2011,” Mr. Krause added.

Chris Halvorsen, global marketing manager for Lawter, Inc., noted that Lawter is a leading resin supplier to the inks, coatings and adhesive markets, and this helps bring stability to the company’s global business.

“Last year, our ink resins business experienced declining demand during the back half, primarily in mature markets and mature product lines,” Mr. Halvorsen said. “We do see increasing demand for our new technology resins, which provide more sustainable ‘greener’ chemistry at competitive economics.”

Matt Grodd of Kane International Corporation noted that the packaging market has been strong.

“Much of the resin we sell goes into food-type packaging, and this market has not been affected by recession,” Mr. Grodd said.

“The ink industry remains soft,” said Joe LeVine, vice president of sales for Resinall. “Both the European and U.S. ink markets continue to struggle.”

Volatility in Raw Materials

It is difficult enough for any business to keep facing increasingly higher raw material costs, but when prices and supply are as volatile as they have been, it makes planning for prices and availability nearly impossible.

“Sudden changes in demand (both increases and decreases) continue to be a big factor in raw material availability and costs,” Mr. Krause said. “Although we are not seeing some of the widespread challenges in availability we saw in 2010, there continues to be lingering uncertainty in business and some unpredictability in ongoing raw material demand. Coupled with uncertainty in global economic growth and geopolitical uncertainty in the Middle East, feedstock costs remain volatile.

“While we would all enjoy a quick return to robust GDP growth, the best that could happen for us to avoid more serious raw material availability and cost challenges would be a steady and predictable return to modest growth,” Mr. Krause added. “There is just too much economic and geopolitical uncertainty right now.”

Rosin prices skyrocketed last year, and while they have come down from the record highs, resin manufacturers are still coping with those costs.

“One of our critical raw materials is rosin, and we have experienced a significant decline in cost from the all-time highs from last year,” Mr. Halvorsen said. “One of the challenges is that while we may be realizing decreased cost, we must first consume the higher cost inventory, but our customers expect to see an immediate benefit to resin prices.

Terry Chomniak, director of sales - process organics at Hydrite Chemical Co., noted that the most critical areas in terms of raw materials for resin producers are product availability and cost. He added that working closely with suppliers is critical in helping to keep costs as stable as possible.

“As feedstocks for raw materials continue to become tighter and prices increase, Hydrite continues to work with our suppliers to our control costs as well as work with other suppliers in approving alternative chemistries,” Mr. Chomniak said.

One of the challenges facing resin companies is alternative use of key ingredients. For example, acrylic acid is an important material for superabsorbent diapers, and propylene is used in gasoline. This makes these materials scarce for resin manufacturers, who have to pay a higher price to secure the materials.

“Raw material pricing in Q1 was quite volatile as acrylate producers announced price increases due to increased cost of feedstocks, seasonal demand and high capacity utilization rates,” Mr. Chomniak said. “Price increases were also driven by a strong demand for acrylic acid as well as propylene. Refineries that produce propylene had financial incentive to blend it into gasoline rather than sell it to the chemical market, thereby creating conditions for tight supply and upward movement of raw material prices, which directly affect the market price of acrylates and other key raw materials.”

“Polyol prices fluctuate based on petroleum, especially as petroleum affects propylene oxide,” Mr. Grodd noted. “Demand is reported as weak on the polyols and the price still goes up. Aromatic isocyanates are driven by benzene price – petroleum has been moving up, as well as IPDI and IPDA still being high in price and hard to get.”

“Although rosin costs have receded from last year’s extremely high level, the price is expected to increase later this year and availability will remain short in the long term,” Mr. LeVine said. “Petrochemical-derived material costs are increasing as the global cost of gasoline continues to escalate. Short term, we expect these costs to remain high. Availability is sufficient to meet the needs of the industry.”

Key Challenges for the Resin Industry

There are plenty of challenges facing resin manufacturers, and cost and supply of raw materials is first and foremost in their minds.

“The major challenges that face the industry continue to focus on the cost as well as the supply and demand of key raw materials, specifically acrylates and their feedstocks,” Mr. Chomniak noted. “Hydrite’s procurement team has continued to approve alternative raw materials from not only domestic sources, but also from global suppliers that allow us to provide a quality product that the industry expects from Hydrite.”

“Cost and availability of historical raw material are and have been our biggest challenges,” Mr. LeVine said. “We are meeting these challenges though innovative use of alternate materials and novel processing technology.”

While the packaging ink market has been fairly stable, the publication and commercial ink markets have been declining.

“A real challenge is the decline in publication and certain commercial print markets,” Mr. Halvorsen said. “However, Lawter is positioned very well to be a reliable and consistent long-term global supplier of rosin-based and hybrid hydrocarbon/rosin resins for offset as well as publication gravure resins in Europe. In all print markets, the consumers are demanding inks with a more sustainable supply chain of raw materials. Our product and business development projects are addressing these demands, and we feel our core raw material, rosin, will be an important contributor.”

With an eye on helping customers reduce costs, BASF is working on new products that can help ink formulators develop alternatives to rising prices.

“With the price of titanium dioxide rising and shortages being reported in the market, Joncryl 633 emulsion polymer is a cost-effective alternative for hiding power and enhanced color appearance for ink formulators and manufacturers,” said Rick Grandke, industry manager - Printing and Packaging, for BASF in North America.

“The supply base continues to face cost pressures and consolidate,” Mr. Grandke added. “Reliable and low cost supply will be important for all of our customers. To that end, BASF continues to leverage its backward integration into critical feedstocks as well as its global sourcing capabilities. We are also broadening our product offerings to the industry. We now offer several resin categories including Joncryl acrylic resins for water-based applications, Laromer acrylate monomers and oligomers for energy curable applications, and Versamid polyamide and Versamid PUR polyurethane resins for flexible packaging. Our Irgacure and Darocur photoinitiators also complement our energy curable resin offering.”

To meet the needs of customers, Diransa San Luis SA, an Argentina-based specialist in acrylic and vinyl polymers, solid resins and chemical specialties for the paint, adhesive and construction industries and the graphic arts, focuses on the development of innovative products. In 2006, the company started production on solid resins, together with water-based polymers for graphic inks, and in 2010, Diransa San Luis SA made a technological agreement with an important Chinese company of the field to produce water-based polymers in Asia.

Expectations for the Coming Year

For resin manufacturers, the challenge is to balance raw material concerns and customer demands. Mr. LeVine noted that continued market pressure is likely, as competition grows for a share of an ever-shrinking market with significant volatility in raw material pricing.

Right now, there is some stability in the raw material market, but that can change quickly.

“Presently, the availability of the key raw materials remain generally balanced,” Mr. Chomniak said. “However, any unplanned outages or production interruptions will have a direct effect on supply and demand, thereby driving up costs.”

Mr. Grodd said that opportunities do exist for resin manufacturers who are working on new products that their customers need.

“There are opportunities in the resin market for those willing to listen to the market and develop new products to meet the demands of the printers,” Mr. Grodd said.

Overall, in spite of the difficulties the resin market faces, Mr. Krause is optimistic about the future for the resin industry.

“The industry will continue to struggle with profitability and face consolidation,” Mr. Krause concluded. “While we expect continued volatility and uncertainty, however, we have been encouraged by the renewed sense of confidence within our industry in a return to steadier growth in 2012.”

Comments: BASF has developed a new solution for formulators who want to increase the opacity of printing inks while using less titanium dioxide. Joncryl 633 emulsion polymer can help ink formulators achieve high levels of color intensity and opacity in inks used on natural kraft substrates such as brown box corrugated containers and paper bags.

• Joncryl 2330

Comments: Joncryl 2330, a new film forming RC acrylic emulsion from BASF Corp., can be used to manufacture cost-effective water-based inks for use in flexible packaging applications. Joncryl 2330 can be used to manufacture film packaging inks that exhibit a well-balanced, combination of printability, resolubility and resistance properties.

Comments: HydriPrint 150 is a neutralized colloidal solution offering good dilutability and viscosity stability over a wide pH range.

• HydriPrint 376

Comments: HydriPrint 376 is a hard, film forming emulsion with fast drying and good rewettability for paper and paperboard flexo inks.

• HydriPrint 396

Comments: HydriPrint 396 (Tg 95C) is an economical polymer for use in overprints and inks utilizing our unique molecular weight modified (MWM) technology. It has high gloss, wetting and excellent dry speed.

• HydriPrint 330

Comments: HydriPrint 330 (Tg 30C) is a film-forming emulsion with the new MWM technology that can be used in overprints where it exhibits excellent wetting and flow properties over high density offset ink coverage.

• HydriPrint 4020

Comments: HydriPrint 4020 represents a new generation of economic neutral pH polymers that utilize the MWM technology. It has excellent rewet and transfer while maintaining the pH/viscosity stability and ease of use similar to our other neutral pH products.

• Resinall is continuing to channel the majority of their product development efforts to decrease/maintain finished product costs. Our focus has been to deliver the best performance for the lowest cost possible. Our resin solution line has been maximized to provide the best letdown, grinding, free flow and new vehicles possible at attractive economics.